Wall Street Firm Drops Bold S&P 500 Call After White House Trade Moves
In a significant move, analysts at Oppenheimer have lifted their year-end S&P 500 forecast to 7,100, outpacing every major Wall Street firm. This bold call comes on the heels of President Donald Trump’s recent trade deals with Japan and the European Union, which have significantly boosted market sentiment.
With the White House having locked down $1.9 trillion in cross-border agreements, including a massive $550 billion deal with Japan and a $1.35 trillion framework with the EU, Oppenheimer sees this as just the beginning of a trade-driven rally. The S&P 500 has now climbed 28.2% since its April 8 low of 4,981, particularly on the back of heavy-hitting cyclical sectors such as industrial bellwethers like Caterpillar and GE Aerospace.
However, while investors are leaning into the Trump trade rally, the geopolitical backdrop remains volatile. China remains a strategic adversary, with export controls on AI chips and upcoming legislation on outbound investments continuing to weigh down the U.S.-China outlook. Beijing has the potential to retaliate with rare earths, cybersecurity mandates, or sluggishness in approving U.S. firms working in China.
Despite this uncertainty, Oppenheimer’s chief investment strategist, John Stoltzfus, is optimistic about the future of the market. "With the announcement of trade deals (Japan, EU) by President Trump…we believe that enough ‘tariff hurdles’ have been overcome for now," he wrote. This sentiment is echoed by other major Wall Street firms such as Morgan Stanley, Goldman Sachs, Bank of America, and RBC, which have all recently raised their targets.
However, none have gone as far as Oppenheimer in calling for a 7,100 S&P 500 forecast by year-end. Additionally, Oppenheimer has reinstated its previous $275 S&P earnings forecast, indicating that it sees healthier corporate profit growth ahead, especially if the Fed holds rates steady this week.
The strong earnings numbers are doing the heavy lifting at this point, with a blended year-over-year earnings growth rate for the S&P 500 of 6.4% as of late July, according to FactSet. This is a significant bump from the 4.9% forecast on June 30 and marks the biggest upgrade mid-season in over two years.
Seven sectors have seen upward revisions led by communication services and industrials, with bank of America estimating that every 1-point EPS upgrade translates into a 0.8% lift in the S&P 500. However, the rally now faces a test with input costs sticky and macro headwinds in view, Q3 guidance needs to carry this momentum or valuations could wobble.
Oppenheimer’s Bold Call: A Turning Point for Markets?
The question remains whether Oppenheimer is ahead of the curve or tempting fate. With trade breakthroughs fueling a rally that has left major Wall Street firms scrambling to catch up, it seems that Oppenheimer sees something others don’t. While President Trump’s recent trade deals have undoubtedly boosted market sentiment, the volatility in the geopolitical backdrop remains a significant concern.
China’s potential for retaliation through rare earths, cybersecurity mandates, or sluggishness in approving U.S. firms working in China could potentially derail the rally. However, Oppenheimer’s chief investment strategist, John Stoltzfus, believes that "enough ‘tariff hurdles’ have been overcome for now," indicating a renewed optimism about the future of the market.
The Impact on Investors
With this bold call from Oppenheimer, investors are left wondering whether to jump into the rally or take a cautious stance. While the numbers do support a positive outlook with earnings revisions at an all-time high and valuations looking relatively cheap, there is still significant uncertainty in the geopolitical backdrop.
Bank of America estimates that every 1-point EPS upgrade translates into a 0.8% lift in the S&P 500, making it essential for Q3 guidance to carry this momentum or valuations could wobble. The question remains whether Oppenheimer’s bold call will prove pertinent or premature.
Conclusion
In conclusion, Oppenheimer’s year-end S&P 500 forecast of 7,100 is a significant turning point for markets. While the trade-driven rally has undoubtedly boosted market sentiment, there are still concerns about the geopolitical backdrop and the potential for China to retaliate through rare earths, cybersecurity mandates, or sluggishness in approving U.S. firms working in China.
The question remains whether Oppenheimer’s bold call will prove pertinent or premature, but one thing is clear: investors must remain vigilant as markets continue to navigate this complex landscape.